2/15/13

Further to yesterday's doubts, just minutes ago the Colombia Red Cross said that the three Colombian nationals and two Peruvian nationals captured while working for junior mining exploreco Braeval (BVL.to) last month and held hostage by the ELN terrorists have been released.

President Santos, when confirming the news to the nation, made a point of condemning the fact that the sixth hostage, Canadian geologist Gernot Wober, was still being held. Quite right too and let's hope for his speedy release.

"To correct recent media reports, Belo Sun confirms that its licensing application has not been rejected."

The lady doth protest too much, methinks. As first pointed out at this humble corner of cyberspace, nobody has said the EIA application has been rejected. What has happened is that the Federal authorities have recommended to the State authorities that the permit application be rejected and have listed a whole bunch of reasons as to why that permit should be rejected.

This is the basket of ten "small silvers" stocks that we've tracked here for over three years, on an annual yearly performance basis. For what it's worth, here today I'm long one of them, a modest position in IMPACT Silver (IPT.v). I was looking at this 2013 year-to-date chart a few minutes ago and thought to myself "Well, 10% down isn't that bad compared to....oh my stars, did you really think that thought just then, you freakin' dumbass?".

You start feeling lucky because you're stock's only down 10% in 6 weeks and you know there's something really wrong, with you and with the market.

"Overall I'm agnostic on the dude but will say that 1) can't knock success and 2) he's never disguised his objectives around junior miners; he's in the sector to make himself money, period. There's no hidden agenda with Rule."

That's still true. Anyway, he does good interviews at least, which is more important than any calls on whether he's right or wrong....he gets your own brainjuices flowing with his thoughts and that's wholly positive. So back to the point and today's is a recommended interview, so stop wasting your time here and go read it yourself.

Your humble scribe received the following and has also received permission to stick it here for more eyes. Please note, however, there are a few numbered annotations that we at IKN Nerve Centre™ have added, with comments at the end.

A prayer to the junior mining gods

Dear Otto,

I have nothing but appreciation, admiration and adoration for your efforts to uncover the BS that has splattered and permeated every level of the junior mining industry (1) and I look forward with relish to the daily delivery at noon in my inbox of your blogging efforts from the previous day (2).

However, the junior market is totally screwed; and, likewise shafted, is my once blooming portfolio. And if the broader markets turn down here, which it looks like they may be doing, the little corner of the world that is junior mining is going to get further annihilated. In short, the bear market is not over.

I know you are a huge fan of technical analysis (3), so I attach the following chart which shows the huge head and shoulders pattern the Venture has traced out. The implication of this is that we are headed to the 2008 lows.

Perhaps this purging is a necessary for the excesses that had built up over the noughties - for a market that was built on bullshit, basically. But the distinction between faith and bullshit is blurred. This market needs faith and a certain amount of bullshit to function (4). Exploration and raising venture capital is built to an extent on promises. Promoters need to raise capital at the highest price they can if only to serve existing shareholders. Promoters have to sell and get people excited with dreams of riches and blue sky and all that other crap. This entails a certain amount of bullshit. It may then turn out that this bullshit does actually contain some mine-able ore.

I am writing to ask two things. First, I wonder if in your blog you might be able to highlight a little more some of the good practice that goes on junior mining (assuming of course there is any) (5). The effect of this might be to restore a little faith, which this market desperately needs if it is to stay above the blue dotted line of support. The man is down. Do we need to carry on kicking him? (6) I suppose we do in a lot of cases, but you take my point (7).

Second, I wonder if you might speak to The Great God Of Junior Mining - I am sure he sure reads your blog - and ask him or her to get their finger out, have some discoveries that get everyone excited again made, and get some takeovers going in the sector (8). It would be nice if some of those low grade bulk tonnage jobs could be taken out, for example, to kickstart that particularly mullered part of town (9). Aren't the Chinese really rich and short of resources? Surely they must want to buy all the stocks in my portfolio at about three times their current price? (Would you pass that on as well).

Yes, I was very, very stupid for believing that charming chap with the shiny teeth and for investing in some fat bloke with a beard and a drill thinking it was a geared way of playing the safehaven that is supposed to be gold and the imminent collapse of fiat money. But (10) I feel I have lost enough money now. I have paid the price for the stupidities of my ways. I will never believe a stock promoter again, I promise. I will manage risk better. All that stuff. But enough is enough now already.

Also, dear Junior Mining God, would you ask the Colombian forestry commission to get their fingers out and permit a certain exploration play, then I might be able to recoup some of my losses with some drilling in the part of the world (11).

And can you get some institutional money back into the sector too.

Many thanks

Yours

A penitent shareholder.

(1) Note to readers: This level of asslicking in a mail usually has the opposite effect to that intended, as I tend to close the mail without getting to the end. In this case the pretty chart a bit further down kept my interest just long enough.
(2) Ditto
(3) Can only be construed as a weak attempt at sarcasm
(4) Strong agreement. It's the balance that's out of kilter at the moment, not the lack of basic ingredients. The Faith/BS ratio is akin to the fear/greed equilibrium.
(5) No
(6) Yes
(7) Even after the almighty asswhuppin' the juniors have taken, IKN is rare amongst the market for providing unglossed alternative views to the constant shiny-happy-people message purveyed by sellside. See the IKN op-ed from yesterday (here) for more, but just because this humble corner of cyberspace is unafraid to tell you about some of the negatives in the junior mining world, don't fall into the trap of believing this is a media norm: It isn't, not by a long way, and until more serious voices than this pissant blog start shining the light more regularly on the cockroaches that inhabit this sector IKN will continue as per.
(8) No
(9) If a project is economically unviable it doesn't get built. period. This is capitalism, not a charity. Just because you thought project X was economic and viable doesn't make it so. Therefore I'd suggest that you contact your market gods all by yourself and ask them to make you less of a dumbass next time around.
(10) Sorry, no buts allowed
(11) Hah! dumbass

That one about history not repeating but rhyming is often attributed to Mark Twain, but as is often the case there's a lot of doubt as to whether he actually said it. However, he's one that is definitely Twain: "It is not worth while to try to keep history from repeating itself, for man's character will always make the preventing of the repetitions impossible."

Oh dear, negative working cap. That negative $345k number includes cash at bank of $247k and accounts payable of $298k, as well as a whole bunch of accrued liabilities (directors' paychecks? That would make my heart bleed). But however you cut it, LSL is the TSX dot tee oh listed exploration junior with no money. There should be a law against that. Oh wait, there is.

So things have started well. We then click through to the report, found here, which includes this table (quick translation: "Largo" is length and "Ancho" is width or girth):

So Congo is da bomb, but you can clearly do much worse than hang around (geddit?) the Northern countries of the South America continent (or even Bolivia: it must be the apí). Later in the note we also get a comparative girth measurement table as well (Ecuador does well), because that's important too. Apparently.

The U.S. Embassy warns U.S. citizens of a potential kidnapping threat in the Cusco area. The Embassy has received information that members of a criminal organization may be planning to kidnap U.S. citizen tourists in the Cusco and Machu Picchu area. Possible targets and methods are not known and the threat is credible at least through the end of February 2013. For the moment, personal travel by U.S. Embassy personnel to the Cusco region, including Machu Picchu, has been prohibited and official travel is severely restricted as a result of this threat.

All mining companies, from the biggest to the smallest, take note. You get your CEO in front of a camera, get some talking head to ask the questions you want to answer, you get the story out there. By the way, the ABX 4q12 NRis best read in a comfy chair and a cup of something hot. In other words, longread. Hey, remember when ABX was the smartest company out there for that Equinox purchase?

Over the weekendthis humble corner of cyberspace reported on the reports out of Colombia that five of the people kidnapped by the ELN terrorists, the two Peruvians and three Colombians, had been freed. This was according to the ELN itself, but since then the Colombia army has saidthat there is no sign of the hostages and they are presumed still held (sadly it wouldn't be the first time that a terrorist group in Colombia said it had freed someone but didn't due to the twisted way mind games are played by these people). Since then the ELN has reiterated that the five have been freed, but this case it's going to be seeing is believing.

It's all rather murky and potentially bad for the five. However there's still no word at all on the Canadian national who was captured at the same time, indentified correctly by a commenter in the last post:

"The Canadian is actually Gernot Wober, a Vancouver based geo. He was one of the Hunter Dickinson main guys for many years. Top notch geologist."

That's what the slogan says at the front of this protest march, seen yesterday in front of the Canadian embassy in the Dominican Republic. The issue is revolves around the Pueblo Viejo mine (and Goldcorp (GG) is a minor partner there, but somehow gets a clean slate from the protesters and Barrick (ABX) gets all the mucky publicity) and the contract it has with the government of Dom Rep. The contract, signed moons ago, is unfair and leaves nothing in the hands of the country, say protesters. Pueblo Viejo (ABX/GG) says a deal is a deal and that over the life of the mine, revenues will be split fairly between company and country, it's just the tax breaks at the start of the production period which make it look advantageous. Not so fast say the protesters, the deal allowed for Capex tax breaks when the project was a $1Bn project, but due to costs blowouts the country has to wait until $4Bn has flowed to cover the final bill before Dom Rep gets decent revenue.

So anyway, yesterdayin Dom Rep the members of congresswho were part of the march were asking to move forward and debate the plan they had to nationalize 51% of the mine; hey, want to play hardball, Barrick? Let's see where this leads.

2/13/13

Yesterday we brought youthis news on the apparent murder of the CEO and CFO of US OTC stock Southridge Enterprises (SRGE) (SRGE.pk), though at the time made a point of saying the deaths were unconfirmed. Now we have this from the Guadalajar Reporter:

In a mysterious case which appears increasingly likely to be linked to an elaborate scam, two foreign mining executives were reportedly found dead on Saturday in the Rio Santa Rosa which divides Jalisco and Nayarit.

Local authorities have denied any knowledge of the two bodies said to have been discovered by farmers, floating in the river between the municipalities of Ixtlan del Rio, Nayarit and Hostotipaquillo, Jalisco. A briefcase was reportedly discovered nearby, containing documents pertaining to Michael Davies and Derald Johnston, the respective CEO and treasurer of U.S. mining firm Southridge Minerals Inc.

Spanish-language newspapers El Informador and El Occidental reported that authorities in Nayarit were investigating the case and awaiting the results of an autopsy at a morgue in Tepic. However, the Nayarit Attorney General’s Office told the Reporter on Monday that it was not in possession of the bodies and could not confirm any details of the case.

The U.S. Consulate in Guadalajara also said it could not confirm the story, while the Hostotipaquillo municipal government said on Tuesday that it knew nothing about the case.

The mining firm in question has not released any information regarding the apparent death of its executives and did not respond when contacted by the Reporter on Monday or Tuesday.

"...about the nasty bug going around the San José mine in Argentina that MUX runs in JV with Hochschild (HOC.L) that's seen 58 workers go down with some mystery gastro illness, the whole mine evacuated of its 800 workers and the mine shut by unions on a flash strike action to ensure the well-being of those not already struck down. The cause of the mass illness hasn't been identified yet (Spanish language digest of the reports here) but with at least some reports ruling out food poisoning it's all a bit of a mystery."

And this...

TORONTO, ONTARIO--(Marketwire - Feb 12, 2013)- McEwen Mining Inc. (MUX)(MUX.TO) announces that operations at its 49% owned San José mine in Santa Cruz Province, Argentina were halted on Monday, February 4, 2013 due to seventy-six employees contracting gastroenteritis. There have been no further cases reported and all employees have recovered in full. It is anticipated that the mine will resume operation shortly. This disruption is not expected to have a material impact on McEwen Mining''s full-year production. The Company will provide a further update once operations resume.

Before the lights went out I spent a part of my Sunday morning carefully reading Gary Tanashian’s latest edition of Notes From The Rabbit Hole #225. As you probably know I hold Gary’s work in very high esteem (for what it’s worth I think you should subscribe to his service ahead of The IKN Weekly, especially if you’re after smart big-picture guidance on our wild and whacky market world) and you may also know, because I’ve mentioned it here a couple of times, I normally wait until the Weekly is out the door before reading his missive but occasionally read his first. Anyway this week I decided to kick back for half an hour and read somebody else instead of writing and it was yet another very good edition and thoroughly enjoyable, brain-stimulating read, but I want to quote just one small block of his prose because it set me thinking (and writing paper and pencil notes this afternoon in true old-school style). By the way, no permission has been sought to re-print this because it’s small and it’s now also very late at night. Bite me, Gary.

“Newsletter writers are bulling the stock rally and appearing very right for now. There is evidently a pressure to appear right in this industry. It has something to do with subscriptions, they tell me.”

That’s true, but for my money it’s incomplete and here follows the rant. Newsletter writers are just one aspect of the sell-side industry, but before we go on just because these words happen to be written in a Weekly newsletter it doesn’t mean (!!) that I’m suddenly sticking up for all and sundry in the sector. This is, after all, the publication that continues to actively shake its own tree and encourage you to carefully think about whether you want or need this service and if you don’t, tells you to unsubscribe (and has done so on several occasions). Also, I think that most newsletter or newsletter-type services, particularly those that cover the mining sector (because those are the ones I tend to come across...I know bugger all about biotech for example) are a waste of time and space for all concerned. I’d much rather talk about the exceptions to that statement than the general rule, so would immediately highlight as good the paid-for subscriber services provided by Gary T (above), Jordan Roy-Byrne, Brent Cook and Claude Cormier as a cut above most others. One thing all those have in common is that little list is willing to call sell on stocks, not just non-stop buys which get forgotten in the mists of time by the scammier end of the newsletter rip-off brigade.

Meanwhile, the brokerages want you to buy stocks just as much as any newsletter writer might do. There are so many examples and manifestations of this basic fact that it’s difficult to know where to start, but I will bore you again by mentioning my personal topical favourite right now, that of Inmet Mining (IMN.to). As soon as the hostile-ish $72 ticket price bid came in from First Quantum (FM.to), the brokerages cried in unison about the lowball nature of the offer and how either a) a counterbid/white knight would swoop in or b) the only way FM can win its prize is by sweetening, all this despite obvious downside risks to this bid (so obvious that even I could spot them, see IKN189 for more). The battlecries did their job and in came the retail orders for IMN.to stock at $72, which ensured several offices-full of monthly salaries in Bay St and Howe St were duly covered. And once again I’m not ruling out the chances of a sweetener (or even that white knight riding in, glistening armour burly steed and all) but it’s been eight weeks and....

Meanwhile the pro-brokerage’s ultimate game isn’t just about collecting kudos and more about collecting money, so the name of the game here is commissions. What happens when that hyped-up buyer who took his broker’s advice and got in on a sure fire arbitrage win gets cold feet about the lack of results and everso slow but sure price deterioration of IMN? Why he decides to play it safe and sell, generating another round of sales commish for his ever-friendly broker! And let’s be clear, we’re not talking about the type of high-pressure boilerhouse operations that foisted scam stocks like Liberty Silver (LBSV) (LSL.to) onto naive and trusting client lists recently (evidenced via this blog post last week (3)) but supposedly upstanding, pillar-of-society houses whose broker and compliance desks are backstopped by professional, lettered anal ysts writing carefully calculated reports in another part of the same building. On that score, why not check at the bottom of the next brokerage report that comes your way and see how many of the stocks they cover get a “buy” reco, compared to the number of “neutral” or “sell” calls. Food for more thought there.

The parasites of the market, those that sit between your back pocket and the company in which you invest (and yes, I very much include myself in that definition) are better suited, much better suited, by active clients. Buy and hold does nothing for their annual bonuses, “sitting on the sidelines” and “keeping powder dry” even worse. We the parasites need your blood to flow in order to siphon off their small part of the greater stream and thus be rewarded. Therefore what we saw in January, the bottled-up “hey folks, let’s get this horrid horrid tax loss selling out the way and then all hands to the pump” move. Therefore a widely read newsletter published a buy reco on a tiny exploreco and Oh Coincidence! Just a few days later the company decides to run an equity financing (with finder’s fee potential, of course). Therefore “gotta keep dancing until the music stops” because it doesn’t matter whether your or your analyst team sees troubles in the near future, just get those sales booked and get that commish rolling in. Therefore the brokered placement. Therefore the newsletter that will trumpet the seven winners it had (from a book of 87 positions). Allow me to quote from one of them and a very recent offering for his clientele (who will remain nameless, suffice to say that I hold the person in contemptuously low regard): “With the right picks we could win big, because of the simple fact that you can only lose 100% of the money you put into a stock, but there is no upside limit to how much you can make on a winner. That’s not a fact that’s of much value to the faint of heart, but for disciplined speculators, it’s what drives our extraordinary gains.”

When passed the quote I had to read it three times; the second to make sure that I’d read it correctly and the third for entertainment value. So those and a hundred other examples of the world cajoling the cash out of your back pocket. The sellside wants you to buy stocks, not just now but All. The. Time. and being what it is it will hog the airwaves to get its message to you, loud and often.

2/12/13

Unofficial reports that at least the two Peruvians amongst the five people working for Braeval Mining (BVL.to) who were kidnapped by the ELN terrorists in Colombia have been freed. If official news comes in this post will get updated.

This is today's best news.

UPDATE:Colombia's newspaper El Tiempo is now reporting that five people, three Colombians and two Peruvians, held by the ELN have been released, according to a communique from the ELN. Apparently the Canadian national who was kidnapped at the same time, Jernoc Wobert, is still being held by the terrorist group

Tweetie said...Also interesting is that they signed over the mine on the day they died:ZAPOPAN, Mexico, Feb. 11, 2013 /PRNewswire/ -- Minera San Jorge S.A. de C.V. expresses it has acquired the Cinco Minas Mine property operations and other mining properties of Southridge Enterprises Inc. President of Minera San Jorge , Jaime Arturo Anaya Trejo , represented that acquisition was signatured on February 11, 2013, and that purchase details in planning for another writing of events. Here's the link to that

Your humble scribe recently had reason to have a look at Kaminak (KAM.v), mainly due to the new 43-101 resource report on its flagship 'Coffee' deposit in the Yukon. The thing is that in thetrumpets a-blaring NR on December 13th we got a lot of warm and fuzzy positives about the project, including the headline 3.24m oz gold at a 0.5 g/t cut-off that led the way. Other things in the promo NR included a decent 90.4% recovery rate from heap leach simulation met testing.

However, the NR failed to point out other things, as there was no mention of the baselines for that 3.24m oz inferred gold resource. For those we mortals had to wait until the filing of the 43-101 on SEDAR which happened January 10th. Here's a little snippet from that document:

"Cut-off grades based on a gold price of US$1,700 per ounce, site operation costs of US$20.00 per tonne mined and assumes 100 percent mining and metallurgical recovery."

Yeah, really. And for what it's worth (just to start the ball rolling on your own DD) at that cut-off, 90% recovery and baseline gold price, the cut gives you ~$25/tonne revenue. So without G&A, taxes and whatever else KAM has in its financials section of the P+L, we're playing with a $5/t margin on this rock. In the notoriously expensive Yukon.Hmm, perhaps this explains this chart:

Moral of the story: Read the filings.

UPDATE post-bell. Seems to have been a little acceleration in selling today.

So much for the Otto Pérez Molina government turning things around. What? The junior mining companies who (try to) explore Guatemala didn't tell you this? Oh don't worry about that, they were probably going to tell you at any moment and it slipped their mind and they'll get round to it any day soon. Data from the Guatemala Ministry of Energy and Mines website, right here.

PS: Apparently the 2012 data are preliminary. Fair enough, though one wonders how difficult it can be to count to two.

2/11/13

With the introduction of a new pre-crushing plant which is expected to be fully completed by the end of June 2012, the Company expects to produce between 610,000 and 670,000 ounces of gold at a cash cost ranging from $510/oz to $575/oz. The cash cost is expected to decrease substantially as the plant reaches full capacity, representing an increase of 65% compared to 2011. The non-cash charges are expected to be approximately $136 per ounce.

Fourth quarter gold production totaled 101,544 ounces, bringing the gold production for the year to 388,478 ounces.

For the year to date the production cost are estimated at $907 per ounce.

News today from OSK:

Osisko Mining Corporation (the "Company" or "Osisko") (OSK.TO)(EWX.F) is proud to announce that Denis Cimon, Vice-President, Technical Services, has been awarded the 2013 Mineral Processor of the Year Award, by the Canadian Mineral Processors Society ("CMP"), one of the branches of the Canadian Institute of Mining, Metallurgy and Petroleum.continues here

2/10/13

Vincent: And in Paris, you can buy beer at MacDonald's.And you know what they call a Quarter Pounder with Cheese in Paris?Jules: They don't call it a Quarter Pounder with Cheese?Vincent: No, they got the metric system there, they wouldn't know what the fuck a Quarter Pounder is.Jules: What'd they call it?Vincent: They call it Royale with Cheese.Jules: Royale with Cheese. What'd they call a Big Mac?Vincent: Big Mac's a Big Mac, but they call it Le Big Mac.Jules: Le big Mac! Ahhaha, what do they call a Whopper?Vincent: I dunno, I didn't go into a Burger King.But you know what they put on French fries in Holland instead of ketchup?Jules: What?Vincent: Mayonnaise.Jules: Goddamn!Vincent: I seen 'em do it man, they fuckin' drown 'em in it.

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